Wages are often tied to expected rates of inflation; thus,one reason why inflation is important is that
A) when wages rise faster than inflation,companies lose money.
B) when wages rise slower than inflation,workers suffer but corporate profits increase.
C) inflation creates uncertainty about costs and prices,which affects both employees and employers.
D) all inflation will eventually lead to hyperinflation,political instability,and war.
E) menu costs mean restaurants have to print new menus,which is costly and unpleasant.

Question

Quizplus · Accepted Answer

Inflation creates uncertainty about costs and prices, which affects both employees and employers. As the value of money decreases, it becomes challenging for employers to plan ahead for their expenses, including employee wages, while employees struggle with the rising cost of living. This uncertainty can lead to economic instability and affect both parties involved. Options A, B, D, and E do not accurately represent the impact of inflation on the economy.

Wages Are Often Tied to Expected Rates of Inflation; Thus,one